Thursday, June 30, 2016

It's no secret that the gun control debate is filled with omissions and non-sequiturs. Both sides do it, and it's not especially charming in either case. Indeed, depending on the particular individuals involved, the whole argument can often be fruitfully summarized as one side yelling Australia! while the other is yelling Chicago! Politically, the issue seems likely to end in a stalemate, given that we find ourselves in an election year. Nevertheless, the debate elsewhere will continue to dominate our social media feeds until a more significant crisis unseats it.

Given these circumstances, today our purpose is to take aim at one of the most important omissions in the gun control debate, namely how privilege shapes its priorities.

To this end, we recommend an intriguing new article at the Mises Institute written by Tate Fegley. As we've discussed previously, gun control advocates often use very broad measures of gun-related violence such as total gun deaths (which includes suicides). However, the article points out that the proposed gun control solutions are really geared towards only a very small subset of the overall gun violence--the mass shooting attacks that have regularly captured headlines over the past year. Fegley offers some stark statistics to make this point:

According to the Bureau of Justice Statistics,less than one percent of all homicides each year in the U.S. are from shootings where 3 or more are killed. And between 1993 and 2011, 70 to 80 percent of firearm homicides (and 90 percent of nonfatal victimizations) were committed with a handgun, not a scary-looking assault rifle.

Most gun violence actually occurs in far less sensational ways. And given the general link between poverty and crime, it's also fair to say that much of this less-publicized violence is likely occurring in poorer communities.

Taking these facts together, the relevant question is why the gun control debate prioritizes mass shootings over the more substantial causes of violence. Surely part of the answer is emotional and part is probably a political desire not to let a crisis go to waste, as they say. However, Fegley suggests, convincingly, that privilege offers part of the explanation as well:

Few of the politicians, celebrities, or media personalities advocating further gun restrictions live in a dangerous neighborhood. Many of them can afford to live in a gated community and hire personal private security, or have such security provided to them at taxpayers' expense. They are able to drive, not walk, through dangerous areas, if not avoid them entirely.

As such, they have little to lose in terms of safety if further restrictions on private gun ownership are implemented. The types of gun violence they are most concerned about are rare events occurring in places where middle and upper class people can imagine themselves: places like college campuses, night clubs, and movie theaters — not the inner-city. Despite railing against the racism of police that people in poor communities face, they tend to give no thought to how these individuals, who do not enjoy the same level or quality of police protection that they do, will protect themselves.

Whatever your preferred solution for the gun control argument is, Fegley's insight is a valuable one. Many of us are fortunate enough to live in circumstances where we are able to basically take our personal security for granted. I am certainly one of them; I don't own a gun for personal protection, and I wouldn't know the first thing about using it if I did. That said, we should acknowledge that this is a privilege that some Americans do not enjoy, and the priorities in the gun control debate ultimately reflect this privilege. They are not designed to address gun violence writ large; they are designed to address the (exceedingly rare) circumstances where people who normally feel secure could come under attack.

Recognizing this privilege doesn't automatically mean those proposals are a bad idea. But it does suggest that we need to consider the possible unintended consequences these laws could have on people that do not share the privilege of feeling secure in their day-to-day lives.

In response to yesterday's post on the white supremacist rally in Sacramento and the resulting free speech implications, a reader of The Daily Face Palm offered a thorough critique. It is well-written and it is also reasonably fair to most of the arguments I made. Ultimately, however, I find myself unmoved for reasons that will soon become clear. I still think people's right to free speech should be protected, even when they say appalling things that I wish no one truly believed. And I still believe initiating violence against such people, whether done by individuals or the government, is not defensible.

The author of the critique is Gus Voss who keeps the This is Progress? blog. I'm sharing the critique with you so that you can make your own decision about the appropriate position on free speech.

In this piece, I won't respond to all the counterarguments offered, but several of the issues seemed worthy of comment. We'll proceed in the same order as the article.

Who Initiated Violence?
In his critique, Voss begins by taking issue with the evidence I used to assign fault to the counter-protesters for initiating violence (emphasis added):

Despite the narrative of chaotic interplay between the two opposing groups, the piece concludes that the anti-fascists initiated the violence because one organizer said she supported a militant direct action against the fascists and because one of the organizations who organized the counter protest is called "By Any Means Necessary"—which is clearly a reference to Malcolm X, who thought that violence was an appropriate means of self-defense. Militant direct action is not, per se, violent. If it were, then the DFP piece contradicts itself. Whenever white supremacists rally in public, wearing insignias of hate (and of militant white supremacists like the Nazis), it is a militant direct action. If it is the case that a mere militant direct action means you are inciting violence, then the white supremacists initiated the violence by holding a public rally.

It's true, of course, that the word "militant" technically has multiple meanings, and not all of them necessitate violence. On this much, we agree. As the word is generally understood, however, violence is absolutely part of the connotation. This is why, for example, the Obama Administration regularly uses the term militant to describe any unknown military-age male who is assassinated in a US drone strike. The purpose of this phrase is obviously to imply the victim was a violent person who deserved what they got, not just an energetic protester. Like it or not, this is how the term militant is used today.

So if one describes their own group as militant, it stands to reason they know exactly how that is going to be interpreted. In this case, one of the counter-protesters volunteered that description for their action. It does not take any serious leap to get from there to assume that a militant protest intended to use violence.

Incidentally, however, all of this is slightly beside the point. Later on in Voss's piece, he offers his own summary of the sequence of events that took place in Sacramento as he understands them:

Fascist white supremacists rallied on/near the state house steps.

Antifascists surrounded the protesters and began shouting insults. The white supremacists responded in kind.

Antifascists started chucking rocks, sticks, and bits of concrete at the white supremacists.

The white supremacists fled, attacking antifascist protesters with knives and clubs on their way out.

Police didn't do much to stop the confrontation.

Step three in that list is the initiation of force, and it was done by the counter-protesters (antifascists). So, definitions aside, we don't disagree on the sequence of events that took place. No one is contending that the counter-protesters started it--they did--all we're debating is whether they were justified in doing so.

On the first point, I don't think I'd disagree with him. Whether you would catch these people explicitly advocating for such things in public is another question. It's a likely implication of the leader's [Matthew Heimbach's] remarks as he envisions a world of ethnically segregated nation-states and appears to have nothing but contempt for every non-white group (and a few groups that include white people as well). But again, having not trolled through the group's internal writings, they don't appear to explicitly call for genocidal violence.

While this could seem like a minor point, it's actually somewhat significant. It means that the government now has to be charged with inferring what a group's true intentions are in order to make a determination of whether they are in fact inherently violent. Maybe in this case, that means they get it right and use it as a basis to deny speech.

But then what's to stop the government from using the same premise on Black Lives Matter next week? Obviously, no one could make a credible case that they advocate for genocide. But I'm sure we've all seen the loop footage that Fox News dredges up for every segment it does on BLM where some random protesters chant "F--- The Police" or something about dead cops. That certainly sounds like a call for violence. And it's against police!

Now, in reality, I know BLM is not a violent group. But if we assume that government is likely to abuse its power to crackdown on minority voices, the same basic rationale for suppression advanced above (the idea of inferring violent intentions) seems like it could be readily twisted against other groups with dissimilar ideologies. The criminal justice system already acts with extraordinary deference to police concerns as it is; if it had a plausible legal tool at its disposal to block groups like BLM, we should assume at least some judges would take advantage of the opportunity.

Within this section, Voss also suggests that I have misunderstood existing jurisprudence on the topic. I'm open to the possibility I have this wrong. I'm not a lawyer and frankly, I don't have time to research case law every time I write a new post. I also think it is inappropriate to take established Supreme Court rulings as a guidepost for how our laws ought to work, which is my primary interest; it merely tells us how they work right now.

With all that said, I actually think he's wrong about this. Here's what he said in full:

The very notion that a white supremacist organization can rally without "imminent calls for violence and destruction" defies First Amendment jurisprudence and simplifies when a public assembly is lawful. White supremacy, as a political ideology, advocates for the genocide of all non-white people. Every public display of white supremacy is a call for violence and destruction. Furthermore, the actual test for whether an assembly is protected under the First Amendment is more strict than calling for imminent violence; an intent by the members of the assembly to disturb the peace is all that is required to amount to unlawful assembly and losing First Amendment protection. And, if onlookers are reasonably fearful of the breakdown of the peace, the assembly loses its legal protections.

The problem is that there is a case that is directly related to the present incident, and it was decided squarely in favor of allowing Nazi-sympathizers the right to assemble. The facts in the case were actually far more extreme than the present ones--the group wanted to march wearing swastikas through a town with numerous Holocaust survivors. And even in that case, the Supreme Court ruled that they had a right to do so. You can read a useful write-up on that episode here. And I will post an update here if Voss explains how this case was superseded to permit restrictions later.

The Genocide Rule
Voss's proposed solution for the predicament is a rule whereby the government doesn't have to grant permits for rallies to groups that advocate genocide. Seems straightforward, but is it? Here's Voss:

An arbitrary decision is that which is based upon random choice or personal whim, rather than with regard to rules or a system. By arguing that the only way for a government to limit white supremacist protections under the First Amendment is to act arbitrarily. Hmm. Perhaps the State could find a rule that would exclude this protection: the government will not grant permits to organize to organizations advocating for genocide. That's sooooooooooo arbitrary, right?

Well, we still have to clear the hurdle that at least this group, doesn't appear to explicitly call for it.

But assuming we can resolve that, we also need to have a compelling definition of genocide. I'm not actually being flippant here. We live in a society where our politicians call for violence (bombing other countries) all the time. Frequently, we also hear people calling for loosening up the rules of engagement (so more fighters--and civilians--can be killed), and we've heard at least one rhetorical flourish hint at the possibility of using nuclear weapons in the Middle East. These actions wouldn't literally kill every Arab or Alawite or Muslim. But the ongoing War in Iraq is credited with causing the deaths of more than 1 million people, so we're not dealing with small numbers.

Presumably, our politicians would have the good sense not to brand the campaign as literally genocidal--I'm sure even a nuclear launch would be justified in the name of "stability". But when the war gets large enough, I submit the end result would look pretty much the same. As another consideration, the State of Israel oppresses Palestinians all the time, and regularly engages in disproportionate violence against them, killing many people. Yet it has many ardent supporters. Does Zionism or simply support for the Israeli government now constitute advocating genocide?

I suspect a reasonably clear definition for genocide could be found (and may exist already), and it would probably exempt the items I suggested above. But that's kind of the point. People, and especially politicians in the US advocate for an unimaginable amount of violence every day. They don't do so in those terms, of course, but it is the necessary implication of their policies. Is there a compelling way to pick and choose which types of advocacy for mass murder are the acceptable ones? I, for one, would be hard-pressed to answer that in the affirmative.

Existing Limits
Voss later makes the point that there are already existing limits on the First Amendment right now. This is an appropriate counter to a rhetorical flourish I offered in the original post. As a reminder, here's what I said before:

No matter what approach we try, the downsides of restricting the First Amendment are going to outweigh any benefits. The First Amendment exists to protect minority and unpopular viewpoints, some of which will have merit and some of which will not. But it has to be an all-or-nothing decision. If the government can pick and choose between which types of speech are allowed, then free speech might as well cease to exist.

And Voss's reply:

This argument is nonsensical. The First Amendment has plenty of limits. For instance, it would be illegal for me to publish a false statement about Eric Schuler if that statement could produce any damage to Eric. The government has decided that this type of speech—false statements resulting in damages—is not allowed. According to the DFP's maxim, there is therefore no freedom of speech. That's why there is no freedom of expression in Germany, Austria, Hungary, Canada, or Mexico—because hate speech is prohibited. Right? That's the argument being made here. If a business can't advertise falsely, then all freedom of speech is thrown out the window. A philosophy of platitudes is a philosophy worth abandoning.

In part, this is the problem with mixing discussion of what the laws are and what they ought to be. That was confusing before, and he's correct to note that. The US actually has the strongest speech protections I'm aware of, incidentally.

He's referring to libel laws in the first part, but to me, these are actually a good example of a restriction that can be abused. Trump has famously promised to open up libel laws so he can sue journalists he dislikes for example--which would obviously be harmful to free expression (technically, to free press rather than free speech, but it's the same basic idea).

However, Voss's thought experiment on hate speech is more directly relevant, and sets me up well for my argument. I don't have a ready example for the countries he listed, but France, which also has hate speech laws, offers a perfect illustration of how they can be used to suppress entirely legitimate political speech. In what I hope is the most egregious case, France recently arrested a woman for wearing a shirt that said "Boycott Israeli Apartheid" because it was inciting hatred. Whether you think Israel is effectively apartheid or not, there's no denying this is political speech. It's even explicitly advocating a peaceful method for redress, namely boycotting. And yet, thanks to hate speech laws, legitimate criticism and speech gets swept up too.

Apologizing for White Supremacists?
At the end of the article, Voss accuses my piece of, in effect, lionizing the white supremacists and laments all the libertarians rushing to defend their right to free speech:

Ironically, the DFP post is playing the victim card for the white supremacists. The vast amount of attention to this topic is being spurred by a bunch of white social libertarians screaming in agony over the atrocities the antifascists subjected the white supremacists to. I didn't even pay the story any real attention until I saw a bunch of white liberals taking hours of their days to philosophize about how the state has no compelling interest in curbing hate speech in the public square.

Ironic indeed, as his thoughts mirror my own. I didn't pay much attention to this story until I noticed people (Voss himself, as it happens) explicitly defending and applauding the use of violence to suppress the rally. But I digress.

The key here is that defending someone's right to speech is not the same as defending their speech. Similarly, making observations about the likely consequences of this event (which I suggested will give the white supremacists more legitimacy than they deserve), is obviously not the same as rooting for those consequences. This should go without saying.

In truth, I defend their right to speak peacefully both because initiating aggression is wrong and because it is the only way to ensure the minority opinions I do endorse will have a chance to speak as well. If we want to ensure everyone, from antiwar groups to Black Lives Matter to the Free State Project, has a voice, we have to defend everyone's voice--even if it means we may occasionally despise the words that come forth.

Wednesday, June 29, 2016

A bizarre, but sadly familiar, scene occurred over the weekend in Sacramento, California as another protest ended in violence. A group calling themselves the Traditional Workers' Party (TWP) had a permit to hold a public rally near the steps of the California statehouse. A group of counter-protesters, describing themselves broadly as anti-fascists, showed up as well. According to The Sacramento Bee write-up on the event, the TWP group had roughly 30 members while the anti-fascists had about 350. Additionally, there were some 100 police officers on site to keep the protest peaceful. They were not successful.

Instead, a melee broke out and ultimately 10 people had to go to the hospital with injuries. No arrests have been made, and it was not immediately clear to which group the victims belonged. Reports suggested that at least some members of both camps suffered injuries. Fortunately, none of the injuries were reported as life-threatening.

Another interesting fact about this event is that--consistent with some of the recent Trump rallies that descended into chaos (one of which was in California, coincidentally)--the police apparently stood by and watched the melee unfold without much intervention.

The TWP identifies itself as a white nationalist organization, which is exactly what it sounds like. Thus, the story is another test of the First Amendment: A widely unpopular group who offends just about everyone wants to hold a public rally, and the question is whether they should be allowed to do so? In this case, the government nominally supported their right to hold a rally by granting a permit, but effectively failed to enforce this decision by allowing violence to interrupt it.

From a libertarian perspective, this issue is relatively straightforward. However, the case is still a very interesting one, in part because it's an issue that divides the left. On one side, there are the consistent civil liberties advocates that believe free speech must be protected for everyone, no matter how contemptible. On the other, we have the more hardcore activists who are comfortable with restrictions on freedom (and apparently violence) if they serve a desirable outcome.

Before we get to our analysis, however, it's worth getting a few salient facts out of the way.

First, the Traditional Workers' Party really is a white supremacist group, at least judging by the sentiments of its leader, Matthew Heimbach. Work from the Southern Poverty Law Center should occasionally merit skepticism, but if even 10% of the quotations assembled here are correct, then it's fair to say the white supremacist label fits well. Indeed, it might actually be too broad, as Heimbach appears to hate just about everyone: libertarians, homosexuals, Muslims, Jews, bankers, black people, Mexicans, etc. His is a very inclusive sort of hatred if you will. Basically, if you can imagine a society that is the exact opposite of libertarianism and also has no diversity whatsoever, that's his endgame. It's conceivable that the other members of the TWP and affiliated groups aren't as extreme as this, but this is who they are following. Thus, it's not really debatable what this group was all about. They really are fascists, and they support a very powerful state that would eliminate many basic freedoms we enjoy today. This might explain why they could only attract 30 people to a rally.

Another fact that's not really debatable is that the counter-protesters appear to have initiated the violence here. There are a few good reasons to believe this is the case. For starters, one of the groups involved in the counter-protest actually calls itself BAMN, By Any Means Necessary. Something tells me violence is included in those means. Indeed, you needn't take my word for it. One of the leaders of the group, Yvette Felarca, took credit for organizing what she literally called a "mass militant action...to shut them down." Without any apparent sense of irony, she also claimed the action would prevent violence.

This understanding is also confirmed by one of the other counter-protesters interviewed by The Sacramento Bee (emphasis added):

James Lee Clark, a homeless activist, said he was surprised that police allowed the anti-fascist demonstrators to engage the neo-Nazis.

“It was weird,” he said. “They usually they don’t let us anywhere near them.”

“We’ve protested against them (neo-Nazis) in previous years, and we’ve never been allowed on state property during the rally, and this time we were there,” he added. “We had the steps. They didn’t try to stop us … it was a pretty interesting dynamic.”

Libertarian Position
With those important facts out of the way, we can move on to discuss the appropriate reaction to such an event.

In this case, the white supremacist rally should be permitted. No matter how abhorrent their views are, the rally is still protected political speech. And unless it crosses the line to imminent calls for violence and destruction, it is not aggression. Thus, aggression should not be initiated against them by the government or anyone else. Their actions merit extreme contempt and criticism, not violence.

This is the paradox of a free society: When people are truly free, they must have the right to advocate for less freedom. It seems like a contradiction in terms, but it is not. It is simply a necessary consequence of applying the nonaggression principle seriously.

Additionally, it's worth noting that different libertarian solutions can go a long way toward minimizing the importance of this issue. This problem only arises in regards to the use of public property and public roads. If the TWP wanted to organize a white supremacist rally on privately owned property, the decision would be left exclusively up to the property owner, who would presumably deny them the privilege of doing so. It's only when we get to public spaces that the government's position on free speech is relevant. Everywhere else, private property owners have the right to suppress the speech they deem unpalatable. Thus, if there are fewer public spaces in which to hold a rally, there are fewer controversies regarding which rallies ultimately take place.

The Case for Restrictions on the First Amendment
Of course, not everyone looks at the world or even this issue through the libertarian lens. Some believe that white supremacist views are sufficiently dangerous that they should be suppressed. This in turn leads to some creative arguments to try to circumvent the speech protections guaranteed by the First Amendment. Here, I'll touch on a couple leading prospects.

Disturbing the Peace / Provoking Lawless Action
The going standard now on whether free speech is permissible is whether or not it will inspire "imminent lawless action". And there's a way in which it's easy to see how the white supremacist rally, or even Trump rallies, could be viewed as provoking the imminent lawless action. The causal links looks like this.

White supremacist group plans a rally > counter-protesters respond to rally with force to "shut it down" > violence and lawlessness ensues, just as it did in Sacramento.

This chain of events is not hard to understand, and it's true that the initial rally is the proximate cause of the lawlessness that follows. Indeed, based on this interview that Heimbach did with the Southern Poverty Law Center, it appears a confrontation was the expected outcome of the weekend's protest. Thus, one could make a case that the rally sparked imminent lawless action (or disturbed the peace) and should be banned accordingly.

However, it should be clear that this line of reasoning leads to unacceptable outcomes. In effect, it would mean that any group can be denied First Amendment assembly / speech protections if an opposition group responds with sufficient force and violence. If it ever became established law, it would actually reward groups that respond violently to ideas and speech that they oppose. That is, no matter how cordially and properly an unpopular cause tried to assemble, they could be still be denied rights based on the reaction of other groups they cannot influence. Obviously, this is not a desirable situation.

Speech is Illegitimate
Another kind of argument against allowing white supremacist rallies holds that the views hold no legitimate value. Clearly, political proposals founded on white supremacist ideology aren't going to be too solid. The question is, Who gets to decide what speech is legitimate and what speech is not?

The answer is the government. And that's also why this solution is unworkable. If the government can arbitrarily decide what speech is permissible, it's likely to crack down on dissent generally. Indeed, historically, we've seen this occur many times in America and elsewhere.

No matter what approach we try, the downsides of restricting the First Amendment are going to outweigh any benefits. The First Amendment exists to protect minority and unpopular viewpoints, some of which will have merit and some of which will not. But it has to be an all-or-nothing decision. If the government can pick and choose between which types of speech are allowed, then free speech might as well cease to exist.

Strategic Considerations
Above, we argued that cracking down on free speech is both wrong and undesirable. If you'd like to see the white supremacist movement further marginalized as I would, it's also unhelpful.

We noted before that one of the lead counter-protesters suggested that the weekend's violence will actually prevent violence in the future. That is technically possible, if the police presence proves more prepared next time around. In the meantime, however, the counter-protesters actions were deeply counterproductive. They transformed a minor local story that probably wouldn't even make the 10 o'clock news into a national story, giving more publicity to the white supremacists than they could have dreamed of.

In fact, Heimbach basically admitted that the overreaction of the left is really their objective in these rallies. From the SPLC interview (emphasis added):

This was a rally for freedom of speech both for nationalists here and around the world. The fact that our free speech rally was attacked by the supposed forces of tolerance I think indicates the importance of rallies like this. We are solidifying a political movement to be able to advocate for our faith, our family, and our folk. That’s our primary objective...

These [leftist] forces talk about tolerance. They talk about freedom of expression. They talk about all these sorts of things. But there wouldn’t have been violence if they had not attacked us. If they had simply stood behind a police barricade they could have tried to drown out our message. They could have simply ignored us and held a rally for their own political agenda, and no one would have gotten hurt. But they organized political terrorism in a premeditated fashion and brought deadly weapons to this event to try and stop our freedom of speech, to stop our freedom of assembly, our First Amendment rights, and to stop our message of nationalism. It seems to be a pretty clear-cut thing of attempted political intimidation and a violation of our civil rights.

Notice what's going on here. This is a person whose ideas would garner virtually no support or sympathy in any normal setting. But because his event just got attacked, he can actually play the victim card while pointing out the (very real) hypocrisy of his opponents. Just imagine how this story must play to regular everyday Americans on the right--most of whom are probably very sick of hearing about crazy activism stories from college campuses. Like everyone else, they probably didn't know the first thing about the TWP. Now, because of the violent reaction, this group is likely to be lumped in with other groups that got targeted by crazy leftists. That is to say, the counter-protesters' opposition to this group does more to legitimize them than almost any other force could.

There is no conceivable way this outcome should be viewed as a success by the counter-protesters.

A much better approach, speaking purely on strategic grounds, is to let the TWP have their rally and hope Mr. Heimbach makes liberal use of the microphone himself. This group's actual views are so bad that they are self-refuting. We have to believe the overwhelming majority of the American public is not going to be enthralled with a person who still condemns the "Jewry" and "usury"[charging interest] and "miscegenation"[interracial marriage], or one who has literally advocated for "re-education centers". As a bonus, his colleague also refers to people as "comrades". Yeah, I'm sure that will play real well to an American audience. (If you click that link, be forewarned. Looks like a dark place.)

Summing Up
There is absolutely no reason to use extreme tactics to prevent a group like the TWP from holding a rally. The First Amendment doesn't need to be gutted for the sake of stopping white supremacy and violence isn't the answer either. Trying to suppress hateful speech only succeeds in giving it legitimacy it does not deserve. Stop doing it.

*For example, in this link, the Southern Poverty Law Center refers offhand to Pat Buchanan as a White Nationalist. Buchanan is a conservative and a nationalist, and he is a white guy, but obviously it ought to take something more than that to justify the label. It's possible I'm simply unfamiliar with a major part of his work, but for now, this seems like a completely unwarranted slur against a man who is one of the strongest antiwar voices on the right.

Tuesday, June 28, 2016

The overreaction against the historic Brexit decision is now in full swing. Financial markets around the world have fallen sharply, though the US has fared slightly better. Britain's FTSE 250 index has fallen 14 percent between Friday and Monday while the US S&P 500 was down 5.3% over the two-day stretch.

Yes, these are nothing if not tumultuous times in the financial markets in the wake of the Brexit. However, it's worth bearing in mind that nothing substantive has changed just yet. It's true that Prime Minister David Cameron has announced his intention to resign, but that event won't take place for a few months. It still remains an open question whether a Brexit will actually take place as the vote itself was non-binding. In the meantime, Britain is still subject to all the same trading and business rules as before. And any changes that do ultimately occur are likely to take well over a year to be determined and will be thoroughly analyzed and telegraphed in advance.

Given all these obstacles to actual change, one may wonder why the markets are acting like the sky is falling. The answer, of course, is uncertainty. Markets hate uncertainty, and now Europe (and all equity markets to some extent) is full of it. Rather than waiting to see what the real consequences are, investors are selling out of risky assets and running to safe havens like gold, silver, and US Treasuries. This makes sense, if for no other reason than one knows that the rest of the herd will do it.

But again, it bears repeating. The Brexit vote, and the associated uncertainty, explains why financial markets have moved. Its impact on actual business thus far from the vote is and must be negligible.

That's why it was strange (yet somehow predictable) to see the government of Italy propose a new 40 billion euro bailout this week for its long-suffering banking industry. Like other banks around the world, Italy's public banks were hit hard in the two days of trading following Brexit--falling by roughly a third (33%) in that timeframe. Thus, the bailout proposal is being framed as a response or consequence of Brexit. Here's a quote from The Telegraph's write-up on this story:

The country [Italy] is the first serious casualty of Brexit contagion and a reminder that the economic destinies of Britain and the rest of Europe are intimately entwined. Morgan Stanley warned in a new report that eurozone GDP would contract by almost as much as British GDP in a "high stress scenario".

There's just one problem with this narrative. It doesn't make any sense.

Ironically, we learn why within the same Telegraph article that gave us the bad news. Quoting again (emphasis mine):

Italy’s banks are the Achilles Heel of the eurozone financial system. Non-performing loans have ratcheted up to 18pc of total balance sheets as a result the country’s slide into depression after the Lehman crisis.

"Non-performing loans" is a banking euphemism for loans that are not going to be paid back. And it probably goes without saying that 18% is a catastrophically high number. For sake of comparison, a similar ratio at the bank I work for, Umpqua Bank, was 0.29% in the most recently filed, publicly available annual report.* That is to say, Italy's banks have a ratio that is 62 times as high.

The reason we can't blame Brexit for this, however, is that these loans didn't go bad overnight. Unless Italy's banks were loaning an ungodly amount of money to investors so they could speculate in currency markets--which would be problematic in itself--then the Brexit vote cannot explain the looming failure of Italian banks. They were well on their way to failure before Brexit. But now, Brexit is being used as a convenient scapegoat for politicians and central bankers to push for emergency financial bailout measures that they've wanted to implement for some time. Brexit is not the cause, but the excuse. Additionally, Italy probably delayed announcing this proposal till after the vote to avoid giving a last-minute reminder to the British of the various financial calamities that awaited them in the EU if they decided to stay.

Whatever explains the timing, however, the problems with Italy's banks are as real as ever. And the proposed bailout is unlikely to provide even a short-run fix because direct bailouts of banking institutions like the sort being proposed are forbidden by EU rules. In the long run, this is actually a good thing--bailouts provide a bandage fix that effectively reward irresponsible behavior. But politics, in Italy and elsewhere, does not concern itself with the long-run. Thus, Italy could be the next flash point in the EU. And in that strange world, the ones in desperate need are actually the ones holding all the cards. As Zero Hedge points out, the Italians effectively have the ability to give the EU an ultimatum: either permit and/or fund the bank bailout, or face another exit referendum after the Italian economy descends further into chaos. After Brexit, it seems unlikely the EU would be willing to take another chance.

Expect the situation in Italy to be a harbinger of things to come, as unblemished optimism from officials and the mainstream media gives way to catastrophic warnings about the situation the Brexit has put us in. But Brexit did not cause the problems we face; rather, it is the excuse that officials are using to finally acknowledge the deep and substantial problems that have existed for some time.

In a US context, this almost certainly means that any possibility of an interest rate hike by the Federal Reserve is all but off the table, with Brexit offering the perfect out. The real question is when the Fed will shift from the narrative of a strong economic recovery to one of urgent damage control. If Brexit wasn't enough, perhaps the likely $2B default in Puerto Rico this week will do the trick?

*You almost certainly don't care about this, but technically, this is the non-performing assets to total assets ratio at Umpqua. Because the numerators includes things besides loans, it is likely to be a slightly higher than the non-performing loan to total assets (balance sheet) figure presented by The Telegraph for Italian banks. As a practical matter, what this means is that if we were to make a true apples to apples comparison, the Italian banks would look even worse. Also, it goes without saying that all views expressed here are strictly my own and in no way a reflection of the opinions or outlook of any decision-makers at Umpqua Bank.

Monday, June 27, 2016

A small but wonderful story emerged out of Kentucky last week. Thanks in part to efforts by the libertarian Institute for Justice organization, Governor Matt Bevin signed a new bill into law that exempts natural hair braiders in Kentucky from needing a license to practice their craft.

Natural hair braiding is popular among people of African descent, and in Kentucky, many of the practitioners were recent immigrants from countries in West Africa. This new bill will make it easier to make a living by eliminating the need for them to take 1,800 hours of training, which could cost up to $20,000. Such training requirements would be onerous in any context, but they are particularly egregious in this case as the standard training courses typically do not involve anything related to hair braiding.

Like most regulations, these rules also had a disproportionately negative impact on poor people. If you come from a wealthy family that can put you through college or let you live at home, then the requirement of taking 1,800 hours of education is annoying but surmountable. You can afford to go without an income for a year while taking classes and living rent-free.

By contrast, consider the case of a new African immigrant or refugee who already knows how to braid. They may not be fully fluent in English yet and may have little verifiable / relevant job experience for potential employers. Meanwhile, if they don't come from a wealthy background, they need to start making a living right away to support themselves and possibly their families. In this circumstance, taking a year off without any source of income and spending thousands of dollars on training probably isn't an option at all. So they may be forced to take a low-paying job instead of using a lucrative skill they already possess, all because of government regulation.

Once we understand the consequences of the previous licensing requirements, it's difficult to see why anyone would support such a rule. The official answer in the case of licensing is typically that it protects the consumer.

This claim should always merit skepticism, but it's particularly preposterous in the case of hair styling. I submit to you that no one has ever incurred irreparable damage through getting a bad haircut (or hair braid, as the case may be). And if they have, that actually just helps my case--since the deliverer of such a haircut was almost certainly required to be licensed when they did it.

No, that's not what this licensing rule was about. If you want to understand why a law exists, you should look for the private interests, not the public ones. In the case of hair braiding licenses, there are two key beneficiaries:*

The people involved in implementing the licensing system, whose salary is partly dependent on the licensing system continuing to exist. And,

The for-profit colleges that provide the education that is required for the licenses. A significant part of their business can evaporate overnight if license requirements are weakened.

According to the Institute for Justice, the initiative to exempt hair braiders from licensing faced only one source of opposition. And it came from one of the special interest groups mentioned above. From the press release (emphasis added):

The effort faced only one attack. After the House Licensing and Occupations Committee approved the bill unanimously and it was sent to the full House, Rep. Hubert Collins—whose wife chairs the Kentucky Board of Hairdressers and Cosmetologists—introduced a last-minute floor amendment that would still have made it impossible for braiders to work legally. (He told the media that he had not spoken to his wife about the issue.) But in the face of overwhelming support for braiding freedom, Rep. Collins did not bring his amendment up for a vote—he simply voted no. S.B. 269 passed the House 86-8.

Fortunately, the special interest group could not successfully defend an indefensible law. So Kentucky's market is now that much freer than it was before. Consumers get more options; and new African immigrants can start a business without fear of legal reprisals. It's a beautiful example of how the much-hated concept of deregulation can help poor people, consumers, and entrepreneurs all at the same time. The only ones who suffer are the rent-seeking special interests, whose jobs and profits depend on government rules rather than individual preferences.

*Another possible beneficiary of strict licensing could be individual practitioners who already spent the time and money needed to get a license. These people understandably might not like to see their investment become next to worthless. Having said this, the benefit they receive is neither as significant nor as visible as the benefits earned by the other groups. For this reason, they would likely produce less opposition to possible reforms than the groups mentioned above.

Friday, June 24, 2016

It's official. The UK voted to leave the EU with a winning margin of more than a million votes, defying the odds, the polls, and the will of the markets.

The outcome comes as a surprise to nearly everyone, including one of the leading figures of the Leave movement, Nigel Farage, who confessed his own pessimism about the vote on Thursday ahead of the final results being released.

The markets also signaled their surprise (and displeasure) with the result, as global stock markets were sent on a tear downward (Japan's index was down 7.5%, for example), while safe haven assets like gold surged higher.

But on the whole, this is good news--probably for Britain because it means less bureaucracy, and likely for the EU as well, as it may soon be rid of its most intransigent member.* But the best news of all is what it portends for the EU's foreign policy.

We touched on this subject last week in our previous post on Brexit. Now that this unlikely event has come to pass, it's worth offering some specifics to flesh out this idea.

UK's National Security Policy Is Going to Get Worse
We'll start with the bad. For several years now, the UK has followed America's lead on issues of terrorism and foreign policy. Newly removed from any kind of moderating influence under the EU, we should expect their policies to become more extreme--which is to say, closer to America's. This is especially likely when it comes to questions of domestic counterterrorism policy. Here are a few examples of some of the bad ideas the UK has supported recently:

A bill that requires teachers, including at preschool and nursery school levels, to report children with signs of radicalization.

In league with President Obama, the UK leadership supported bombing Syria back in the 2013 after the false flag chemical weapons attack. Fortunately, David Cameron made the mistake of putting the matter to a vote in Parliament, and he lost.

The UK subsequently decided to begin bombing Syria after the Paris Attacks

Along with France and the US, the UK was one of the leading advocates for the disastrous intervention in Libya.

All of the above are things that have already happened. Now it's likely to get worse in the near-term because one of the primary issues pushed by the Leave campaign was the issue of immigration. That is to say, the Leave campaign wants to curtail it significantly. And to be fair, one of their arguments for this is logical; for example, they argue that the open immigration policy makes Britain's social programs (NHS, schools, etc.) financially unsustainable. (This is true, but eliminating massive social programs is a better solution than eliminating immigration.) The other argument, however, is straight from the Trump playbook--playing into prejudices against Muslims and an exaggerated fear of terrorism.

Knowing how little most people care about fiscal policy concerns (the name itself sounds boring), we must assume that the fear angle on immigration was the successful one. In turn, this suggests that the UK public's views are hardening against immigrants on the topic. That doesn't bode well for domestic policy or foreign policy in the UK.

Germany Becomes the Dominant Voice of the EU
While the unmooring of British policy may prove to be unpleasant to watch, the good news is that the more moderate voice of Germany will now be an even more dominant driver of EU policy.

The key reasons for Germany's dominance are economic in nature. Among major nations remaining in the EU, Germany enjoys the largest economy and has the lowest unemployment rate. The government is also on sound financial footing, enjoying a record-high surplus in 2015. Denmark and Sweden are also performing reasonably well, but these countries do not have the same political clout as Germany on the international stage due to their smaller size.

The only real peer competitor to Germany would be France. However, France's economy is in shambles, with unemployment rates consistently hovering around 10%, high government debt, etc. As this article from The Financial Times shows, it doesn't really matter what metric you look at; it's all bad.

When these problems come to a head in France, likely in a future fiscal debt crisis, Germany will have to be the one leading the charge to save them. So even though France might like to be a coequal partner in leading the EU, their economy will prevent them from doing so. As France has proved to be very hawkish in recent years (advocating intervention in Libya, silencing pro-Palestinian speech, enacting crazy emergency counterterrorism powers, and so on), it's probably for the best that their government's voice will remain on the sidelines.

So the Germans will come to the fore. This is cause for optimism. The Germans are not perfect noninterventionists by any means. But they have been a consistent voice of restraint. Some recent examples follow:

German Chancellor Angela Merkel has been one of the leading voices in negotiating peace and ceasefire deals in eastern Ukraine

German business representatives and ministers were among the first to reach out to Iran to begin exploring trade opportunities (which would in turn reduce the chance for hostilities later)

German leaders have pushed back against Prime Minister Netanyahu, when he tried to claim Merkel supported Israel's actions in the Occupied West Bank. The German Foreign Minister Frank-Walter Steinmeier also endorsed a UN resolution that explicitly condemned settlements as a violation of international law, possibly signaling a shift in Germany's stance further away from Israel.

German Foreign Minister Steinmeier recently decried NATO's provocative actions along the Russian border, saying the following: "What we should not do now is to inflame the situation with loud saber-rattling and war cries. Anyone who thinks that symbolic tank parades on the Eastern border of the alliance create more security is mistaken."

The above policies paint a clear portrait of the German approach to foreign policy, one which places significantly more emphasis on peace than either the US or the UK. Additionally, Germany's leadership appears increasingly comfortable with criticizing the status quo in productive ways. This bodes well for the future.

Summing Up

There are good reasons to be optimistic about the foreign policy implications of the Brexit. The contrast between the UK and Germany could hardly be stronger. And while the UK will likely continue its trend towards belligerence, the solidification of Germany as the dominant and moderate voice of the EU is poised to make up for it.

*Scotland's the only one that emerges as a real loser here. Scotland recently voted down a proposal to secede from the UK, effectively deciding that they were willing to tolerate the transgressions of the government in London in order to remain a member of the EU. In yesterday's vote, every district in Scotland voted in favor of remaining of EU, further confirming this bias. But now they'll get nothing they wanted. Still not free from London, and newly on their way out of the EU. On the plus side, news is breaking this morning that the Scottish National Party is already calling for a new referendum of their own to become an independent Scotland that stays in the EU.

Assuming you're not a shareholder of Boeing or a customer of Iran Air, it might not be immediately clear why this is big news. And in an ideal world, it wouldn't be. US companies would be able to trade freely with Iranian companies, and every new business deal would be entirely mundane. In the world we actually live in, however, this deal is nothing short of groundbreaking. It has major implications in both practical and symbolic ways.

Practical Implications
Starting first with the practical effects, Iran has been suffering under US and/or international sanctions to some extent dating back to 1979,* shortly after the Iranian Revolution overthrew the US-backed dictator there. Since that time, each successive US president, save George Bush Sr., has managed to tighten the sanctions regime. Despite failing to produce any positive political effects, the sanctions regime has had many negative effects for the Iranian economy over the years. One of the more acute, and obscure, consequences came from Iranian companies' inability to import new civilian airplanes or import spare parts to maintain their existing fleet. The result is that Iran's commercial aircraft are considerably less reliable and safe, on average, than the rest of the world's.

While very specific, this problem makes perfect sense from an economic perspective. Airplanes represent a very complex and specialized product, as well as a considerable amount of capital. There's no reason that an Iranian entrepreneur couldn't start an airplane or spare parts manufacturing business. But their ability to be successful in a such a specialized industry is limited by the size of the market.

An Economics Tangent
To see a more tangible example of this principle at work, think of the rise of specialty online retailers. And in particular, we'll use the not-entirely-random case of vegan shoes. Before the Internet and e-commerce had taken off, there were probably about as many vegans as there are today. And if you're vegan, especially if you're a guy, the prospect of finding a good vegan (non-leather) pair of dress shoes is a daunting one. It basically comes down to a tradeoff between principle and pain. You could buy high-end dress shoes that were fashionable and comfortable, but you'd have to compromise on principle because they would invariably be made of leather. Or you could find cheap dress shoes that were vegan by accident to make them cheap, but these would typically look terrible and feel even worse. I surely was not the only one confronted with this dilemma, and yet, my moderately-sized hometown of Boise, Idaho did not have a single vegan shoe store. It was outrageous, I assure you.

Fortunately, the Internet (and before that, the mail-order catalog to a degree) provided the solution. Because while there were not enough male vegans in Boise in need of professional shoes to support a dedicated store (indeed, I doubt the number was significantly higher than 1), there are more than enough in the world to do so. And thus, we have the rise of successful online vegan shoe stores such as the literally named Vegetarian-Shoes.co.uk.

Back to Iran
So why did I tell you a long-winded story about the trials of the vegan shoe consumer? Because it actually explains the Iranian airline predicament quite well. When dealing with a very specialized product with limited demand, the size of the market is everything. By preventing other countries from trading with Iran, this is akin to removing the ability of the vegan shoe store to sell online. They might be able to survive, but they won't be able to specialize and refine their product as much as an organization that has the world market as their possible customer base. Combine that with Iran's inability to import products, and the result is that the products that are available probably aren't going to be as good. In this way, reducing the size of the market limits specialization and tends to reduce product quality as well.

Given this backdrop, the entry of Boeing, the largest aircraft manufacturer in the world, into the Iranian market is likely to provide real and meaningful benefits to Iranian travelers. This alone would be great news.

Symbolic Implications
The benefits do not end there however. There's also a major symbolic component. As noted above, Iran and the US have been at odds more or less continuously since 1979. The two countries have been on the brink of war (with the US as the instigator) on multiple occasions, and it is almost a miracle that a direct full-scale conflict never erupted.

This is important context because Boeing isn't just a major aircraft manufacturer. They are also one of the US's largest defense contractors. This means that one of the principal members of the US military-industrial-complex is now engaging in a peaceful mutually beneficial trade with a nation that was a principal member on the US hit list until very recently. The US Government may have refused to fully normalize relations or fully lift sanctions on Iran. But Boeing is not waiting for the dust to settle. This deal represents a kind of private detente, one that may prove to be nearly as significant as the Iran Deal was in moving the ball towards normalcy.

Incentives Aligned with Peace and Trade
It should go without saying that Boeing did not pursue this deal out of the goodness of their heart. Instead, this is about the bottom line, and that's perfectly okay.

It should also be noted that, historically, Boeing is not shy about influencing the political process when it benefits the bottom line. This was seen most recently when it lobbied successfully for preserving that great archetype of corporate welfare, the Export-Import Bank. But influencing the government comes hand-in-hand with being a defense contractor. No individual or group in US society has much use for combat helicopters or other high-tech weapons. So if they are going to find a buyer, it will necessarily be through well-coordinated lobbying of the purchasers. This may explain why in the 2014 election cycle, Boeing was the 11th most prolific lobbying organization (based on dollars spent) in the US, according to OpenSecrets.org.

And as a defense contractor, it often makes business sense for Boeing to support war and hostilities around the globe. Rising tensions increase the perceived need for more weapons and military equipment, and war itself necessitates the replenishment of ammunition and equipment. From a financial perspective, these are great things for Boeing.

In this case, however, the tables have turned. Boeing has made the calculation that the potential profits from gaining Iranian airlines as new civilian aircraft customers are larger than the profits associated with an outright conflict or just continuing tensions in the region. The fact that Boeing pursued and announced this deal publicly, even before some of the details are final, proves that they have committed to this decision.

This is critical, because there will definitely be efforts to try to shut it down. Already, members of Congress have weighed in suggesting that this deal somehow represents a threat to US national security if Iran replaces old civilian airplanes with new, American-made ones. There are also still residual obstacles to the deal emerging from Obama's failure to honestly implement sanctions relief. Currently, Iran is still effectively denied access to the international payments system, so it's unclear how they would pay for the $25 billion deal. This has made some skeptical that the deal will actually stick.

My view, however, is that the sale will stand. This deal represents an opportunity for Boeing to earn more revenue from one customer than the whole company did in the first quarter of this year. Boeing has a very strong vested interest in seeing this transaction through. And their extensive lobbying power means they will almost certainly be able to eliminate any existing political obstacles in their path. If Boeing's lobbying organization can save the Export-Import Bank, which has no legitimate arguments supporting it, then surely it can also ram through a business deal that has no legitimate arguments opposing it. Hopefully, in the process, they'll eliminate the obstacles for other countries and companies to trade with Iran as well. In short, Boeing's profit-driven self-interest may be able to provide relief that President Obama promised but refused to provide himself.

Time will tell how all the details shake out on this story. But for now, we can sit back and enjoy the beautiful spectacle. A defense contractor is lobbying for peace and trade with Iran--and they are going to win.

*Disclaimer: This link portrays US actions in a much more positive light than is warranted, but it still summarizes some of the key events.

Wednesday, June 22, 2016

News on the ongoing quagmire in Syria took an unexpected turn last week. In the wake of the recent terror attack, we expected, and heard, numerous demands to expand bombing campaigns against ISIS. What was less expected was the internal letter that surfaced in the State Department with 51 diplomats doing what US diplomats do best--advocate for war. But the war they want is against the government of Syria, rather than ISIS.

The timing of this is confusing, given that ISIS terrorism was the top foreign policy issue of the week and the Syrian government is one of the key enemies of ISIS. But the actual policy isn't a terribly new idea. The question of whether to bomb the government in Syria, for one purpose or another, has been seriously contemplated since at least late 2013 when video of a chemical weapons attack in Syria went viral.* US public opposition managed to silence the war drums in that case, but the policy remained on the table. The US Government eventually started bombing terrorist targets in Syria in late 2014 and have continued since. To date, however, the bombs haven't been turned on the Syrian government.

Despite no formal bombing, it would be a mistake to assume the US has been de facto aligned with the Syrian government in the fight against terrorist groups. President Obama and others in the Administration have frequently said that Assad must go. On the ground, the US has attempted to implement this regime change policy with covert action by arming Al Qaeda-linked rebel groups that are fighting the Assad government. This has been going on since sometime in 2012. This contrasts with the common narrative on the subject that the US actions have only been aimed against the terror groups. In fact, the US Government has effectively been fighting on both sides of the same war--quite literally, in some instances.

Fighting on both sides of the same war isn't good for anyone besides the weapons manufacturers. But it illustrates the challenge that Syria presents. As is so often the case, there are no good options in Syria. The Obama Administration has responded to this by effectively choosing both without committing 100% to either path.

It would be far better, however, if the US stayed out of the situation entirely. Such a position is not an endorsement of the status quo, but a recognition that there is no plausible way for the US to improve the situation and a great many ways that we could make it worse.

To fully understand why this is the case, we recommend a recent article at The Week written by Bonnie Kristian. In the piece, Kristian reminds readers of President Obama's original, and laudable foreign policy rule, namely "Don't do stupid shit." But then she shows how our current intervention in Syria is a clear deviation from this principle, much like Libya was before it.

In brief, Kristian contemplates the three possible outcomes of current US policy considerations:
1. Focused efforts on destroying ISIS, thereby further empowering the Assad regime.
2. Focus efforts on destroying the Assad regime, thereby further empowering ISIS and Al Qaeda or other extremists, much as happened in Libya. Or,
3. Destroy both simultaneously (which would almost certainly require US occupation) and then the US is stuck trying to rebuild Syrian society from scratch. Recent experience in Iraq and Afghanistan suggests that is unlikely to end well.

The conclusion is clear. Obama needs to get back to his professed rule: Stop doing stupid shit.

*Readers will note that this attack was originally blamed on the Assad government by the USA. Subsequent journalism, however, showed that the qui bono approach offered the correct understanding. In fact, it was a false flag attack perpetrated by the Syrian opposition (with the Al Qaeda faction taking the lead) with a goal of getting the US to intervene on their side. The US deeply wanted to take the bait, but public opinion ultimately prevented it.

Tuesday, June 21, 2016

One aspect of the Orlando Shooting that has been widely reported is the fact that the FBI interviewed shooter multiple times and found insufficient evidence to prove criminality. Indeed, we noted this in our own coverage, and it is a very important fact.

However, it's a fact that's easy to be misused. On the one hand, it shows the apparent futility of mass surveillance--this guy was flagged for additional investigation and nothing got through. Given that successful mass surveillance would likely look a lot like this, with a future terror suspect being well before the actual attack, it should make the argument for additional mass surveillance or policing powers thoroughly absurd. Here, existing tools worked in the sense of identifying a potential threat. But because predicting a future terrorist or terror attack is very difficult, it did not actually prevent the atrocity in this case.

The problem is that this argument can also be spun in the other way. Here, the focus is not on the apparent futility of counterterror efforts, but on the question of why exactly the FBI let this man go? There are several interesting possible explanations for this, in addition to the obvious one that he wasn't a credible threat and had done nothing criminal. There's also the suggestion that the FBI's resources may have been distracted by some de facto terrorist entrapment jobs elsewhere in Florida, which have very little to do with keeping American safe. It has also been suggested that the FBI's policy of pursuing every lead prevents them from focusing resources on the real threats that may unfold over a longer period. And of course, there's the sentiment expressed by the reliably awful Senator Lindsey Graham, "The FBI closed this file because the Obama administration treats radical Islamic threats as common crimes." Because, of course, everyone knows that responsible people Call It Radical Islam (TM) and would use the military to bomb people in countries on the other side of the world to solve it once and for all. Just like we solved terrorism after 9/11 by bombing Afghanistan and ... wait, that didn't happen.

Morbid joking aside, the Senator's camp has emerged as a dominant one. Obviously, the argument goes, people like Mateen shouldn't be released into society because look what happened. Thus, we should get rid of whatever restrictions prevented the FBI from holding him.

It's not hard to follow the train of thoughts that gets you to the conclusion above. The issue is that those restrictions amount to basic due process, and they're kind of the foundation of the criminal justice system, at least in theory. The assumption here is that expanding police powers in this way, by effectively allowing the government to hold people on mere suspicion of wrongdoing rather than any actual proof, the government would be able to prevent these attacks. This is unlikely to be true, but in a time of intense anxiety and fear after a very public attack, many people are desperate for anything to help.

All of which makes Glenn Greenwald's recent article in The Washington Post a very timely and welcome defense of due process. The whole piece is exceptional and I'd encourage you to read it in full if you're remotely on the fence on this subject. This excerpt offers a look into his conclusion:

...based on what we know, the FBI acted properly [in this case]. Agents have the power they need, and they were right to close the case on Mateen. Just because someone successfully carried out a violent mass attack does not prove that police powers were inadequate or that existing powers were misapplied. No minimally free society can prevent all violence. In the United States, we do not hold suspects for crimes they have not committed.

In some ways, it's an old argument--there's a trade-off between liberty and security, and in the wake of terror attack, people only look at one side of the coin. But as Greenwald himself notes, this argument needs to be rehashed in the wake of every terror attack. Because there will also be politicians willing to promise the impossible by sacrificing rights that ought to be off the table.

Monday, June 20, 2016

Libertarians often face the accusation that we believe in utopia. "If people were all kind and generous," someone might say, "then we'd all get along and libertarianism would be great. But people are not uniformly good, which is why we need a large government to protect us."

In a way, it's an interesting argument because it begins by nearly giving away the store--of course libertarianism would be the ideal system!

But, at the same time, it's also effectively rhetorically, because it paints its opposition as the idealists. And few people over the age of 30 want to be idealists.

The trouble is that libertarianism doesn't assert any particular view of human nature, either bad or good. Instead, we simply assume that people tend to follow incentives and pursue their own self-interest. If they are incentivized to do bad or corrupt things, they'll often do those things. If they are incentivized to do good things, they will probably do those instead. Individual exceptions to the rule will always exist, but these are the general trends.

Most people would actually agree with the statement that people are motivated by their own self-interest. Some people may prefer to use an adjective like "greedy" and wish it were not the case. But this doesn't change the basic common understanding--that people pursue their own interests.

The core difference, then, between libertarians and everyone else is that libertarians apply this same assumption to everyone, whether they are in the government or in the private sector. Other political philosophies implicitly assume that people in government operate under a different priority--serving the public interest. But the people in government are just the same as people in the private sector. So why should we assume that winning an election will transform them into more moral and altruistic people than everyone else? Clearly, we should not.

And given that people in government and in the private sector all still follow incentives, the question becomes where are the incentives the best.

In the private sector, people pursue their own interest by providing goods and services to other people and businesses that voluntarily pay for them. If you want more money, your task is to provide better goods and services or provide them to more people. It is possible to achieve short-term gains through fraud or similar means, but the risk of getting caught is high and the consequences are severe. If you constantly rip off your customers, eventually you will have no customers.

In the public sector, the incentives are considerably different. If you're a politician, your self-interest is served by getting votes, and getting campaign contributions that help you get votes. You can get votes by genuinely making positive reforms that help people. But you can also get votes through pandering to special interests and dishonest fear-mongering. Judging by our current politics, this second approach seems to clearly be the dominant one. If you're a bureaucrat, the incentives may vary somewhat based on your particular job. One thing we do know, however, is that public employees in the US are much harder to fire than their private sector peers. And it likely goes without saying that this fact probably doesn't encourage excellence 100% of the time.

Thus, we might able to summarize the libertarian approach as follows: We think people in government have bad incentives and limited accountability, so we want the government to do as little as possible.

Other political camps, right or left, implicitly believe the following: We agree that people in government often behave poorly and are unaccountable. But, with the right people in charge and the right reforms implemented, it can be fixed.

Which position sounds unrealistic now?

Following on with this general theme, we're recommending a new article at the Foundation for Economic Education. It's called "Unicorn Governance," and the author persuasively suggests that most people who advocate expanding the government do so because they believe in a different kind of government. They don't want to expand a government with all the dysfunctions we know today, not really. Rather, they want to expand a different, conceptual government that works like they want it to in theory, even if it cannot be found in practice.

This is what the author describes as the "unicorn problem". Advocating for government policies based on an imaginary form of government makes as much as sense as advocating the use of imaginary unicorns as a serious mass transit solution. In short, we must confront the world as it actually exists, not the world we wish existed. Here's the link:

Friday, June 17, 2016

The War on Drugs has claimed another innocent family among its victims. Fortunately, no one died in this latest episode. But an 18-year-old teenager has been arrested and charged with attempted murder for actions that any reasonable person should view as self-defense. Here's what happened.

In April, a SWAT team from the Austin Police Department raided the house of teenager Tyler Harrell and his parents. The raid took place before 6 a.m. in the morning and proceeded in a typical shock-and-awe fashion. Police officers breached the door and threw flash-bang grenades into the house with the intent of disorienting the occupants. Meanwhile, a loudspeaker announced that the organization conducting the raid was the APD.

It's difficult to imagine the stream of thoughts that must go through one's head when they wake up to a series of loud noises, explosions, and screams of family members. In this case, Tyler Harrell claims, not unreasonably, that he believed his family's home was being invaded and that he and his parents were in danger. So he grabbed his (legally owned) rifle and shot at the intruders down a stairwell, hitting a police officer in the leg. Another officer unsuccessfully returned fire, and the SWAT team soon retreated from the house. Harrell came out and surrendered peacefully shortly thereafter, according to the write-up from the Austin American-Statesman.

Harrell claims to have heard the intruders shout that they were APD only after he had fired on the men. Meanwhile, the police are effectively claiming he must have known the officers were police, given that they were announcing it over a loudspeaker. Thus, they are accusing him of willfully trying to kill a police officer and have charged him with attempted capital murder.

The purpose for this raid was that police suspected Harrell of dealing drugs, specifically marijuana and possibly cocaine. During the raid, police found 34 grams of marijuana, which is not even enough to merit a felony in the state of Texas. But in order to root out this unspeakable crime against humanity--namely, the possession of a particular dried plant--the police conducted a violent and dangerous raid, which left one person to the hospital and now has the potential to ruin a young man's life.

The only real good news is that it appears the crime Harrell has been charged with will be almost impossible to prove. Based on my brief research, the crime of attempted capital murder would seem to require Harrell to know, at the time, that the person he shot at was a police officer conducting his lawful duties. Given the circumstances of this event, and the fact that Harrell surrendered himself peacefully a few minutes later after the SWAT team retreated, this is implausible. It would mean that Harrell knowingly made the decision to try to fight off the APD SWAT team by himself, but then decided to surrender a few minutes later, after they had retreated. Clearly, this narrative makes no sense. And one hopes, for his sake, that jurors won't believe that preposterous story is true beyond a reasonable doubt.

Stepping back from the specifics, there are a few broader issues to unpack here.

Media Deference to Authority
The first issue is how absurdly deferential local media can be towards the police when covering stories like this. For example, this article from KXAN, the local NBC affiliate, cites exactly no information from the perspective of the accused or his lawyer, and then wraps up with this gem from the police chief and president of the local police association (emphasis added).

"Although people have tried to take two lives of our officers, our folks still come to work day in and day out in the mission of keeping Austin one of the safest big cities in the country,” said [Police Chief] Acevedo. “I hope the public takes some time to help me help lift them up in these challenging weeks.”

The president of the Austin Police Association also made a point to mention, all officers are on high alert as they deal with a culture that seems to be bold enough to shoot officers.

Yeah, maybe it's the culture. Or, maybe it's the fact that you storm people's houses while they're asleep and lead with explosives--explosives whose whole purpose is to disorient the target. Nah, probably the culture thing. Video games corrupting the youth and what not.

This is unhelpful. When police do stupid things, like needlessly escalating a situation before trying any alternatives, they should be called on it. Maybe that will discourage them from doing it again in the future. Maybe it could also influence jurors or the prosecution not to destroy Harrell's life over this.

(Note one of the "two lives" mentioned in the quote above relates to an unrelated incident that had occurred shortly before the raid.)

The War on Drugs is Awful
The intensity of the raid conducted in this case seems disproportionate for almost any suspect. Perhaps if someone was known to be a dangerous murderer / terrorist / rapist, an argument could be made. The fact that it was actually about a little over an ounce of pot makes this story even worse.

And yet, this is what happens in the War on Drugs all the time. It's not clear that Harrell even was a drug dealer, as the authorities initially suspected. But even if he was, would that justify launching a military-style raid on his parent's house?

Which leads us to another issue. To a far greater degree than other law enforcement matters, the War on Drugs has to deal with a lot of ambiguity. This is the nature of victimless crimes. In a consensual sale of drugs, neither the seller nor the buyer has any interest in reporting the crime; indeed, since they're both breaking the law, they have a clear incentive to be as quiet as possible about it. In turn, this makes the police's job considerably harder. They can't get leads from a victim or a crime scene, because neither of those exist. Instead, they have to set up sting operations and take more action based on less evidence. That's not a formula that's likely to turn out well. In this case, the APD may have thought they were conducting a raid on Austin's equivalent of Scarface, a person dealing narcotics and armed with automatic weapons. Instead, they probably just found a teenager who likes to smoke pot. That's a serious margin of error.

Stigmatizing Legal Gun Ownership
We mentioned earlier that Harrell's gun was legally owned. This seems like a small detail in the context of this story, but it's actually critical.

You see, the reason the APD made (and now defends) the decision to use a paramilitary SWAT approach stems from their initial investigative work. They sifted through the personal garbage of the Harrells and allegedly found three items of note: a plastic bag with marijuana residue, a substance that tested positive for cocaine, and empty ammunition boxes. This last item is what justified the SWAT team.

But why should that be the case? If Harrell owned the weapon legally, why is it reasonable to assume he's any more prone to violence and criminality than anyone else? I confess I don't know much about guns myself, but it seems to me the police probably should. And given that the gun was legal, it follows that the ammunition they found was compatible with legal weapons. Surely, people who deal with weapons and gun laws on a daily basis would know something like this. In spite of this, however, Reason notes that the police have continued to inaccurately refer to the weapon as an AK-47, in an effort to vilify Harrell.

This same issue is seen at play in the broader story of police brutality in the US. Of the stories that broke into become national news stories, most involved individuals that were unarmed--Michael Brown, Eric Garner, Akai Gurley, etc. In cases where the victim had a gun or another weapon, authorities use it to imply criminality and avoid accountability.

This general pattern is also evident in the statistics that are used to track police brutality incidents, as compiled by The Guardian. Here, events can be filtered based on the type of weapon owned by the victim, if any. But it doesn't attempt to draw any distinctions between whether the weapon was legal or not, or whether it was pulled out. The Guardian's tool is a fantastic resource, but this is a major limitation. The question of whether a police shooting was justified shouldn't hinge on whether the victim happened to possess a weapon. It should depend on whether the victim was actually a threat to anyone around them. Those are not at all the same.

In the discussion that ensued following our earlier post this week on the Orlando Shooting, I suggested one possible reason to oppose gun control is that it can create a stigma around legal gun owners. In turn, this can be used as a justification for disproportionate force to be used against otherwise peaceful people. This is not just a theoretical argument. It's the reason Tyler Harrell and his family woke up to a violent assault on their house one April morning instead of a knock on the door.